“Get out of my car! Get out of my car.” This is a paraphrase of the words of the recently deceased and incomparably great Bernie Marcus. Marcus co-founded Home Depot with Arthur Blank and Ken Langone.
The person Marcus ordered out of the car was a venture capitalist, and more importantly to Marcus and his colleagues, a venture capitalist who had agreed to invest $3 million in Home Depot. As Marcus recalled, Built from scratchIn a 1999 business memoir he co-wrote with Blank, he wrote, “We needed $3 million like blood runs through your veins when you die from a stab wound.”
However, the principled Marcus still refused to accept a dime from the investors, simply because the investors insulted Marcus and the team he put together with all sorts of demands. They would have to give up their health insurance and accept even lower wages than they had previously accepted in exchange for risky employment in companies that are more like concepts than businesses.
Marcus’ old actions raise an obvious question: unusually tight funding for a concept that had no interest from blue-chip investment banks (they agreed to the wonderful Ken Langone and his “Unknown Investment Bank”). Naka, why didn’t you do that? t Will Marcus accept the conditions (any conditions) necessary to make things work?
The answer is that entrepreneurship is a state of mind, not a choice. It’s a powerful belief in other ways than just meeting. take the lead Customer needs are so deeply ingrained that compromising the vision is nearly impossible. Marcus’ vision is not insulted by this picky investor and Marcus and his colleagues have the last laugh. By the late 1990s, it would have been worth $3 million. $12 billion.
While the story of missed profits for VCs is a welcome one, it is also a real distraction. The bigger story is how much the market’s view of Home Depot has changed. It’s easy to see how far Marcus, Blank, and Langone’s vision diverged from conventional wisdom when you look at the incredible return this little-known VC missed out on. As Marcus himself explained, “No one believed we could do it.” The latter is said regularly by people from all walks of life, and often in a self-serving way.
Marcus was telling the truth, albeit in an understated way. Let’s take another look at the return the VC was expecting. No one will abandon such an investment unless there is a consensus to ensure that they do so. it can’t be done. But Marcus et al.
Even better, they did it in a decent way. Marcus said of the bankers who helped finance and liquefy The Home Depot’s eventual growth, “They risked their careers for us, and we is protecting them.” As you said. Banks make loans that need to be repaid, so bankers who make incorrect loans may not be employed by the bank for long.
Customers were treated even better than bank employees. They had to be treated with care, and more importantly, they should never be sold anything they didn’t need. Instead, Home Depot’s professional staff will guide them, assuming that, if requested, they will eventually rely on Home Depot to make the major purchases they need to carry out major projects in their homes. It will handle beautifully.
Importantly, the purchasing costs for large projects were very low. Marcus believes, as the greats of the business world do, that real wealth is not created by so-called “pricing power” and the margins that come with it, but by prices that are driven as low as possible in conjunction with shrinking margins. I understood that it would happen. Marcus knew that the lower prices he offered his customers could be compensated for by much higher sales volumes. He was right.
Evidence supporting the previous claim can be seen in the fact that Home Depot’s market capitalization continues to rise. What’s notable about the latter is that Marcus calculated the $12 billion worth of investment opportunities missed by the aforementioned VCs using 1999 numbers. Stop and imagine what Home Depot, worth about $400 billion, is doing now.
This further speaks to Marcus’ boundless politeness. He recognized that “real money is capital” and lived that maxim to the letter. He developed an employee stock ownership plan that created thousands of millionaire employees at Home Depot. Further proof of his greatness. His genius will be missed, but not forgotten.
This article Originally published by RealClearMarkets Available via RealClearWire.
John Tamny is the editor of RealClearMarkets and Park View InstituteSenior Researcher market research instituteSenior Economic Advisor at Applied Finance Advisors (www.appliedfinance.com). His latest book, released on April 16, 2024, is co-authored with Jack Ryan. Bringing Adam Smith into American homes: The case against homeownership.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
All content produced by the Daily Caller News Foundation, an independent, nonpartisan news distribution service, is available free of charge to legitimate news publishers with large audiences. All republished articles must include our logo, reporter byline, and DCNF affiliation. If you have any questions about our guidelines or our partnership, please contact us at licensing@dailycallernewsfoundation.org.
